It is said that "the second new multi-demon stock". Recently, there is a "demon wind" blowing in a secondary new stock in the Hong Kong stock market.
Since October 16, the share price of the new shareholder Zhiyou Bio-B (02496) has been sitting on the "slide" and falling repeatedly, falling more than 30 per cent after a week of decline. As of Oct. 20, the company's shares closed at HK $10.80, down more than 45% from its listing high of HK $19.80.
At the same time, the company's trading volume is pitifully small. Zhitong Financial APP noted that Youzhiyou's turnover was only HK $696000 on October 20, compared with less than HK $2 million for the whole week, in sharp contrast to the 10 million turnover of most pharmaceutical stocks.
In 2023, as the first year of the company's listing, Youzhiyou Biology has been "abandoned" by market funds in less than a month. What happened behind this?
The prospect of commercialization is uncertain.
According to Zhitong Financial APP, Youzhiyou Biology, founded in 2010, is a biotechnology company. The company is committed to the development of bispecific antibody (BsAb)-based therapy for the treatment of cancer or cancer-related complications and senile eye diseases, and has designed and developed seven clinical phase drug candidate pipelines, six of which are BsAb structures for the treatment of some of the most severe cancer types and cancer-related complications.
Zhitong Financial APP learned that BsAb is an artificial protein that can recognize and specifically bind two antigens or epitopes, block the biological function mediated by antigens / epitopes at the same time, or make antigen cells bind more closely. In recent years, due to the deepening of people's understanding of the pathogenesis of various diseases and the rapid development of therapeutic mAb, the global BsAb market is growing rapidly. In 2021, the global BsAb market has reached 3.8 billion US dollars. With further breakthroughs in technology and clinical research, it is expected to increase further to US $58.6 billion in 2030. The size of China's BsAb market in 2021 is 100 million yuan (RMB, the same below), which is expected to grow at a compound annual growth rate of 251.7% in the future, and is expected to reach 61.5 billion yuan by 2030.
Among them, M701, the core product of Youzhiyou, is a recombinant BsAb that targets cancer cells expressing human epithelial cell adhesion molecule (EpCAM) and T cells expressing human differentiation cluster 3 (CD3). It is reported that M701 is EpCAM × CD3 BsAb focusing on the treatment of MA and MPE. The company completed the phase I clinical trial of M701 in the treatment of malignant ascites (MA) in January 2022, and is currently conducting a phase II clinical trial to evaluate the efficacy of M701 combined with systemic therapy in the treatment of malignant ascites (MA). In addition, the company also launched a phase Ib/II clinical trial of M701 in the treatment of malignant pleural effusion (MPE) in China in November 2022.
According to the mid-2023 report, in the direction of malignant ascites (MA), Youzhiyou Bio is currently conducting phase II clinical trials to evaluate the efficacy of M701 monotherapy combined with systemic therapy (including targeted therapy, immunotherapy or chemotherapy) in the treatment of MA. Good data have been observed. In the direction of malignant pleural effusion (MPE), Youzhiyou is currently conducting phase Ib/II clinical trials of M701 in the treatment of MPE in China, and good data have also been observed. Currently Youzhiyou Biology plans to submit a BLA application for M701 for the treatment of malignant ascites (MA) in the first quarter of 2025.
However, because MA and MPE are often associated with malignant tumors of multiple organs with poor prognosis, advanced cancer patients rarely benefit from drugs on the market, and there are few candidate drugs approved to treat MA and MPE, which directly limits the market size of M701.
Zhitong Finance APP noted that currently, none of the chemotherapy, immunosuppressant and anti-angiogenic drugs in the Chinese market has been approved by the SDA for the treatment of MA or MPE, and no drugs have been included in the recommendations of China's MA or MPE clinical guidelines, which leads to limited market space for MA and MPE therapy in China.
According to Frost Sullivan statistics, the market size of MA therapy in China is expected to increase from 10.7 billion yuan in 2021 to 12.4 billion yuan in 2025 and 14.7 billion yuan in 2030, while the market size of MPE therapy in China is expected to increase from 11.6 billion yuan in 2021 to 13.2 billion yuan in 2025 and 15.3 billion yuan in 2030. It can be seen that its market size is relatively limited, at the same time, its growth rate is not too fast.
From the perspective of competition pattern, M701 is also facing competition from many sides. According to public data, as of August 25, 2023, there are one drug application for renewal and six global clinical development and innovative drug pipelines specially developed for the treatment of MA or MPE in the market, including two BsAb,3 cell therapy pipelines, one polypeptide pipeline and one other protein pipeline.
The profit dilemma is difficult to solve.
In addition to the difficulties faced by the core product M701, several of the company's other drugs are still in an early stage, and Youzhiyou, which has no commercial products, is also heavily in debt.
According to the prospectus, Youzhiyou's other income in 2021, 2022 and the first half of 2023 was 12.798 million yuan, 2.56 million yuan and 6.919 million yuan respectively. The net losses were about 149 million yuan, 189 million yuan and 86.568 million yuan respectively, with an increase of 27% in 2022 compared with the same period last year. As for the expansion of the loss, Youzhiyou Biology admitted that this was mainly affected by the increase in R & D expenditure. During the reporting period, the company's R & D expenditure increased from 113 million yuan in 2021 to 157 million yuan in 2022, an increase of nearly 40 percent over the same period last year, compared with 71.598 million yuan in the first half of 2023.
Before making a profit, the main way to support the daily operation of Youzhiyou is financing and borrowing. At present, Youzhiyou's cash flow is extremely tight. Zhitong Financial APP observed that in 2021, 2022 and the first half of 2023, the net cash income from Youzhiyou's biological financing activities was 81.034 million yuan, 241 million yuan and 49 million yuan respectively, so its cash flow was barely enough to support the expenditure of that year. As of the end of June 2023, the company's cash and cash equivalents were only 76.445 million yuan, which was only enough to cover R & D expenditure in the first half of 2023. If the future R & D expenditure shows an expansion trend, if there is a break-up, it will make the R & D pipeline "down", and the whole company will fall into a liquidity crisis.
This is the main reason why the company is actively listed. It is reported that 80% of the funds raised from the listing of the company are expected to be used for clinical trials, preparation of registration applications and commercialization of the core product M701; about 12% will be used for clinical trials planned for Y101D; and about 8% will be used for general corporate purposes.
Taken together, Youzhiyou's share price is "falling" for no reason. Under the background that it will take time for the company's core products to be commercialized, it is not realistic to realize their own hematopoietic circulation through the commercialization of the company's products in the short term. At the same time, the prospect of the core product M701 industry is limited, with the market competition becoming fierce, Youzhiyou can get a few pieces of the pie, it remains to be seen.